Proximo Weekly: Top takeaways from Project & Infrastructure report 2021
Proximo Intelligence's latest Project & Infrastructure report presents the latest Global, regional and sector data, as well as league tables and proprietary research into major project finance industry trends.
The confluence of climate change, energy security concerns in Europe and parts of Asia, a post pandemic recovery that is reliant on infrastructure development, and rising EPC and commodity costs have given energy transition and infrastructure financing more urgency than ever before. The opportunities are long term and bankable, but technology risk and rising EPC costs still present major hurdles for many projects.
The Proximo Project & Infrastructure report brings together our top line market data from 2021, including breakdowns of market activity by region and sector, league tables for bank lenders in the largest sectors and regions, and Proximo’s market survey. These are the main takeaways:
Big-ticket financings were responsible for the bulk of the improvement in volumes between 2020 and 2022. Deals of over $1 billion in size accounted for $188 billion in volumes in 2021 (or 49% of total activity), compared to $124 billion in 2020. Telecoms and water financings – including German fibre investments and the Suez acquisition – were a big factor in this bumper crop. While it is difficult to discern a post pandemic bounce in the data – anecdotally banks were able to continue closing deals in 2020 – but it’s possible that the timings of investments in telecoms and oil & gas infrastructure did benefit.
European and North American renewables dominate. North America and Europe were unsurprisingly by far the most active regions. Europe accounts for $113 billion across 279 deals, with North America not far behind on a total of $94 billion across 214 deals. Renewables account for just under $96 billion across 408 deals, with PV solar deals dominating, representing 26.5% of all volumes, with $4 billion across 215 deals. But offshore wind accounts for a small number of big-ticket (and higher-priced) financings. Of note is the $3.9 billion ECA-backed Dogger Bank C Wind Farm, the third phase of what will be the world’s largest offshore wind farm when complete in March 2026. The ease with which renewables can raise debt, off the back of plunging build costs and bank ESG mandates is extremely encouraging.
In 2021 Proximo recorded no financings for coal capacity, whether brownfield or greenfield. There are still ways of financing coal – mostly by providing corporate debt to coal generators without attaching it to specific assets – without appearing in our data. But it is clear that the reputational risks associated with financing coal are real, even if the world is a long way from weaning itself from coal-fired power. In fact, the biggest development in coal power finance in 2021, was the launch of an initiative to acquire and retire coal capacity in Asia.
Large fibre financings in Europe have boosted infrastructure volumes. Five of the digital infrastructure deals of over $1 billion equivalent each were for fibre installations, while another two were data centre portfolio acquisitions. In total, Broadband / cable network projects account for just under $25 billion, with half of the top ten infrastructure financings in digital assets. Indeed, Digital’s dominance is stark. Broadband, fibre and cable networks account for slightly under a fifth of volumes, and data centres another 7%. Governments have been anxious to respond to the demands imposed by changing post-pandemic work patterns, and private debt and equity providers have generally been able to support those ambitions.
European and particularly French banks have performed incredibly well in 2021, posting volumes and deal numbers comparable to the dominant Japanese banks. Societe Generale, Credit Agricole and BNP Paribas performed particularly well.
Research findings
As part of the report Proximo produced a short quantitative survey of market participants (banks, non-bank lenders, sponsors, developers, legal advisors, insurers and operators) active in project finance designed to explore the views and experiences of these participants.
Overall, survey respondents (51 in total) had a favourable view of the current state of the project finance sector. Dynamic, Positive and Healthy were the main adjectives respondents chose when describing their view of the market. This corresponds to expectations of deal flow with a majority of respondents expecting deal flow over the next 12 months to be higher, with only 12% expecting a reduction in deal flow.
The vast majority of respondents are expecting pricing on project finance deals to increase over the next 12 months. This sentiment might be unsurprising given global inflation and rising EPC and commodity costs, though bank lenders in particular, have long hoped for a debt pricing correction that has yet to materialise. However, most do not expect tenors to increase project finance debt.
Renewables is a hot sector while oil & gas has struggled to regain ground. Renewables is experiencing a strong recovery, with many excited about investing in energy transition related assets, whether in battery storage, hydrogen, offshore wind or PV solar, or a combination of them all. Oil & gas has fared less well, with a plurality of survey respondents believing oil & gas had the worst recovery over the past 12 months. Proximo’s 2021 data bears this out to a limited extent. Oil gas volumes increased from 2020 to 2021 but they have yet to reach the levels they attained in 2019, although the largest three deals recorded by Proximo in 2021 were, in fact, oil & gas deals.
Non commercial bank lending is growing in significance. A majority of survey respondents expect alternative lenders to increase in importance over the next 12 months, with project bonds, DFI/MDB and ECA loans, particularly significant. Indeed, the overlap between ECAs and DFI support in project finance is growing, compounded by heightened geopolitical instability and the stronger focus on energy transition.
Find out more about this report here. You can also request a demo today by contacting us at intelligence@txfmedia.com.
Selected news articles from Proximo last week
Axium Infrastructure signs $300m loan to acquire stake in ExGen portfolio
Axium Infrastructure US has signed a $330 million loan for Project Whitetails, the acquisition of a 49% interest in ExGen Renewables Partners (EGRP), a 1.4GW portfolio of 24 operating wind assets and four solar assets across the US, which includes the upsizing of the Criterion wind project.
Syndication closes on Obelix FTTH
Syndication has closed for the financing of the €2 billion Obelix FTTH project.
Sun Cable mandates financial advisers
Sun Cable has appointed Macquarie Capital, Moelis & Company and MA Financial Group as joint financial advisors to advise, structure, arrange and execute the capital raising strategy for the Australia-Asia PowerLink.
KAPP issues RfQ for Az Zour North 2&3 IWPP
The Kuwait Authority for Partnership Projects (KAPP), in collaboration with the Ministry of Electricity & Water & Renewable Energy of the State of Kuwait (MEWRE), is seeking to qualify teams to participate in a tender for the development, financing, design, procurement, engineering, construction, testing, commissioning, operation, maintenance and transfer of the Az-Zour North Phase 2 & 3 IWPP project.
SOUTH AMERICA
15 line up for Chile’s energy supply auction
Chile’s National Energy Commission (CNE) has received economic and administrative proposals from 15 companies seeking to participate in the auction of 5,250 GWh-year of energy to supply the energy needs of regulated customers of the National Electric System.
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